Pricing of Rosetta Stone 2009 IPO

1. Prepare a common size income statement for the years prior to the IPO (Excel).  Discuss your findings. Do you see any evidence of scale economies or other factors that could affect your assumptions of future profitability or cash flow? (Maximum of 1/2 page of text, plus supporting Excel tab 1). 
2. Construct the 2008 cash flow statement (Excel). What accounts for the increase in the company’s cash balance from 2007 to 2008? Note: For the operating cash flows portion of this, include all deferred taxes and all deferred revenue in your determination of operating cash flows and include the current portion of long-term debt in financing cash flows. Be careful not to double-count profit by also including it in the change in accumulated income. And be careful not to double count depreciation and amortization by not adjusting property and equipment and/or intangibles for changes due to depreciation and amortization. (Maximum 1 page explaining your analysis, plus supporting Excel Tab 2). 
3. Using the data in the case, including comparables data, estimate the WACC of Rosetta Stone and explain the assumptions you made for the risk-free rate, the market risk premium, the equity beta, and the marginal corporate tax rate.  How did you use the comparable firm data in this analysis? (Maximum 1 page of text, plus Excel Tab 3). 
4. Using your estimate of WACC and the unlevered free cash flow projections in Exhibit 7A from the Course Materials tab on iLearn, prepare a discounted cash flow valuation for Rosetta Stone. Based on a discounted cash flow valuation, what do you expect to be the aftermarket value of the equity and the aftermarket price of the Rosetta Stone shares? What continuing value did you use in the DCF valuation and how did you determine it? (Maximum 1 page, plus Excel Tab 4). 
5. As an alternative to discounted cash flow, use the comparable firm data for EBITDA multiples to estimate aftermarket value and aftermarket price per share.  Explain your work. (Maximum 1 page, plus Excel Tab 5). 
6. Based on the EBITDA multiples of the comparable firms, use @Risk to assess the sensitivity of aftermarket value per share to uncertainty.  Explain your work (Maximum 1 page, plus Excel Tab 6).
7. Based on your analysis in parts 4, 5, and 6, at what price would you recommend that the Rosetta Stone shares be sold? Explain your reasoning. (Maximum 1 page, plus Excel Tab 7). 
8. Considering any planned underpricing of the offering, and adjusting for an underwriter discount (fee) of 7 percent of gross proceeds, what do you expect will be the Postmoney (aftermarket) value per share?  How did you deal with the fact that about half of the shares are being sold by selling shareholders and will not increase shares outstanding or provide proceeds to Rosetta Stone? (Maximum 1 page, plus Excel Tab 8). (Note: Since selling at a discount to aftermarket value will dilute value per share, this price will probably be somewhat lower than the aftermarket value you estimated before the offering.)
9. Relative to your estimate of aftermarket value per share in part 8, what is the full cost of the IPO as a percent of aftermarket value per share?  What is the full cost as a percentage of the aftermarket value you estimated in part 4, 5, or 6, whichever you finally used in your IPO pricing? Explain. (1 page of text, plus Excel Tab 9).

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more